No 433: A Comparison of Panel Data Models in estimating Technical Efficiency

Abstract: The purpose of this paper is two-fold. First, it compares
the performance of various panel data models in estimating technical
efficiency in production. Second, it applies various stochastic frontier
panel data models to estimate the technical efficiency of Iran’s cotton
production and to provide empirical evidence on the sources of technical
inefficiency of cotton production using 2000-2012 panel data from Iran's 13
cotton producing provinces. The results indicate that labor and seeds are
determinants of cotton production. Further, an investigation of the sources
of technical inefficiency reveals that inorganic fertilizers result in
reducing technical efficiency. The mean technical efficiency according to
most of the models is found to be around 80 per cent. The empirical results
show evidence of variations in the distribution of estimated efficiency
amongst the different models. We also find a large difference in technical
efficiency levels between provinces, which shows that geography and
management’s impacts on technical efficiency are quite different among the
provinces.

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